Bulletin

Energy stocks end lower as demand concerns eclipse Fed

CynthiaLin

NEW YORK (MarketWatch) -- Energy stocks ended Tuesday broadly lower as economic data from China and the U.S. reignited concerns about oil demand, quelling a momentary comeback led by the Federal Reserve's decision to keep lending rates at a record low.

The sector lost steam after a brief upward stint following the Fed statement that showed it took steps to avoid deflation. "Anything that smacks of deflation will take energy down," said Senior Vice President Ethan Bellamy of Wunderlich Securities.

Crude-oil futures settled lower against a rising dollar and China's disappointing import data, but held just above the $80-mark. Oil for September delivery slid $1.23, or 1.5%, to $80.25 a barrel. Read more about oil prices.

Earlier, China said its trade surplus for July soared to $28.7 billion, data showed, with imports rising 22.7% -- a bigger-than-expected slowdown in import growth.

"Across the energy complex, investors have been increasingly concerned over a possible slowdown in China," Susquehanna analyst Brian Niemiec said in a note. "And recent crude oil import data, which decreased 15% in July, was not a positive indicator."

Ahead of the bell, the U.S. Labor Department reported that nonfarm productivity fell 0.9% in the second quarter, while the Commerce Department reported that wholesale inventories climbed only 0.4% in June.

"The one year strip on both gas and oil are getting spanked after the Labor Department reported unexpected declines in productivity," Bellamy said. "Nymex futures strips drive the energy business, so where they go the equities should follow."

On Monday, the drilling contractor announced plans to acquire Superior Well Services Inc.
SWSI
for $22.12 a share in cash. Later on, three separate law firms reported they were investigating Superior Well's board for not adequately shopping around before approving the sale to Nabors.

Following the announcement, analysts at Macquarie Securities cut Superior Well's rating to neutral, while Johnson Rice & Co. analysts downgraded the company to equal weight from overweight.

Inergy LP
nrgy, +0.00%
shares extended their decline, dropping another 5.8%, as the Kansas City-based energy company plans to issue $2 billion in common units as part of its deal in acquiring Inergy Holdings LP
nrgp, +0.00%

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